Do savings rates follow the Fed?

Which of these are you?

• The Fed just raised rates and your savings rate has not moved: that is the normal outcome for most accounts in our snapshot. Skip to the section on what to do after a move, and judge your rate by its level, not its reaction.
• You want to know how a Fed decision reaches a bank at all: read the first section. The short version is that it does not reach your account directly.
• You were told to move to "the bank that follows the Fed": read the failure modes. One event cannot tell you which banks will follow the next one.
• You already know your gap to the top rate and need the switch decision itself: go to Chapter 1 and come back for the timing.

How does a Fed decision reach a savings account?

A Fed decision reaches your savings account only through your bank's own choice. The Fed sets a target range for an overnight rate between banks. Your bank sets the APY on your account, and no rule links the two.

The Federal Open Market Committee sets a target range for the federal funds rate, which the Fed describes as what banks pay each other for overnight borrowing. On 16 September 2026 the Committee voted to raise that range by one quarter of a percentage point, to 3-3/4 to 4 percent. To keep the actual rate inside the range, the Fed's Board changes the interest rate it pays banks on their reserve balances. According to the Fed, an increase in that rate puts upward pressure on a range of short-term interest rates, and changes in the target range are typically accompanied by matching changes to it.

The Fed also says a change in the federal funds rate normally affects, and is accompanied by, changes in other interest rates and financial conditions more broadly. The word "normally" matters here. A savings account is a product each bank prices itself.

So when someone says savings rates "follow the Fed," they are describing a tendency across many banks, not a mechanism that binds yours. The research finds that banks pass on only part of a rise, and our snapshot is consistent with that: partial and uneven. The rest of this chapter measures how partial.

What is deposit beta, and what does the research say?

Deposit beta is the share of a change in the Fed's policy rate that a bank passes to its deposit rate. A beta of 1 means the bank passes on the whole move, and a beta of 0 means none of it. Measuring it needs many Fed moves.

The standard academic reference is Itamar Drechsler, Alexi Savov and Philipp Schnabl, "The Deposits Channel of Monetary Policy," published in the Quarterly Journal of Economics (volume 132, issue 4, 2017, pages 1819 to 1876; DOI 10.1093/qje/qjx019). Their abstract reports that when the Fed raises the funds rate, banks widen the spreads they charge on deposits and experience deposit outflows. They attribute this to market power in deposit markets, and find that spreads increase more and deposits flow out more in concentrated markets.

In plain words, a wider spread means the bank pays depositors a smaller share of the increase. The paper's finding is about differences between deposit markets, which is a statement about banks' pricing power, not a rule that big banks always pass on nothing. We did not find a primary source that sorts banks into fixed "high beta" and "low beta" camps by size or type, and we do not claim one. Fixed "high beta" and "low beta" camps by bank size are common in commentary, but we do not use them without a source.

A proper deposit beta is a slope: the change in a bank's deposit rate divided by the change in the policy rate, estimated across many moves. One event gives you one point. What we can measure from one event is pass-through:

Pass-through = change in your APY (percentage points) / change in the Fed target (percentage points).

If the target rises 0.25 points and an account's APY rises 0.20 points, pass-through is 0.20 / 0.25 = 0.80, or 80 percent. That is a description of what one bank did once, and it is the only quantity our snapshot reports.

What did our snapshot show?

By 3 October, after 16 days of follow-up, 29 of the 110 institutions we could measure had raised their best savings rate by at least 0.05 points, 76 were unchanged and 5 had cut. The median raise was 0.20 points, which is 80 percent of the quarter-point move, and the median institution overall did not move at all.

The table is from our Fed hike response snapshot. We compared each institution's best high-yield savings APY on 16 September 2026, the day of the announcement, with its rate on 3 October 2026. A change of 0.05 points or more counts as a raise or a cut. The Fed's statement came out at 2:00 p.m. on 16 September, so our baseline can include a bank that reacted within hours. Early movers may therefore be undercounted.

Among the 29 that raised, 12 passed on the full quarter point or more and 17 passed on less. The median raiser passed on 80 percent of the move, a raise of 0.20 points. The median time from the decision to the first confirmed raise was 7 days: 6 of the 29 responded within a day, 15 within 7 days, and 10 took 12 to 16 days. The 5 institutions that cut did so for reasons we cannot see from a rate alone. A rate alone cannot say whether a cut was a promotion ending, a balance tier change or the bank's own pricing.

Split by institution type, the numbers are small, and the credit union, fintech and investment rows rest on 11, 4 and 2 institutions, so read them as anecdotes, not rates.

Two features of the data matter more than the type split. First, every one of the 29 institutions that raised started at 3.00 percent or higher, and the median starting rate among raisers was 3.52 percent, against 2.05 percent for the unchanged group. Second, 33 of the 76 unchanged institutions started below 1.00 percent, and 34 of the 76 started at 3.00 percent or higher. "Did not move" therefore covers two very different situations: accounts that were already paying close to nothing and stayed there, and accounts already paying a competitive rate that did not need to move yet.

That is why the question "did my bank follow the Fed?" is the wrong test. It tells you what your bank did, and says little about whether you are paid a fair rate.

The limits, stated plainly

This is one Federal Reserve decision measured over 16 days. It is not a deposit beta and not a ranking, and we do not name institutions as leaders or laggards. Banks that move after 3 October are counted as unchanged for now. Rates are scraped from public pages, so a change at the bank can show up on our side a day or more late. Promotional and balance-tiered rates are not separated out, and a bank can change a rate for reasons unrelated to the Fed. Only institutions we track with a fresh rate on both dates are included, so 110 is smaller than our full tracked set and is not the whole market. The snapshot is marked preliminary and will be updated as time passes and the Fed moves again.

One note on dates. The Fed announced the move on 16 September 2026 and its rate on reserve balances took effect on 17 September. Our study page dates the decision 17 September and counts its 16 days of follow-up from then. The baseline is the last day before that, which is the announcement day.

What is a Fed move worth to you in dollars?

A full quarter point is worth about $61 a year on $25,000. A saver whose bank passed on none of the hike earns about that much less than one whose bank passed on all of it. A gap of three points or more is worth far more.

The arithmetic uses the model of record for the Switching Guidebook. Month interest is Balance x ((1 + APY)^(1/12) - 1), the balance stays constant, interest is not compounded on interest, and taxes are ignored. Interest on savings is taxable either way, so the comparison is pre-tax on both sides. The rates below are hypothetical round numbers, not quotes. Start with the case where your bank did not pass the hike along and another account paid a quarter point more.

The same balance and the same bank-versus-field gap matter much more when the starting gap is large. This second example uses an account that was already paying very little, as many of the unchanged institutions in our snapshot were, against a hypothetical competitive rate.

Both examples use the cost definition from Chapter 1: switching cost is hours times the value of an hour plus one-time fees minus any bonus you will actually receive. Here that is 2 hours x $25 = $50. The table shows how the value of passing on a quarter point depends on the share passed and on the size of the balance. The comparison account is a hypothetical 3.25 percent, which a bank that passed on the whole hike from 3.00 percent would pay. Each figure is the yearly interest you give up by staying, before any switching cost.

Compare that with the level gap. On $25,000, the difference between 3.00 percent and a hypothetical 3.90 percent is $218.11 a year, and the difference between 0.50 percent and 3.90 percent is $833.28. The hike changed the first gap by $60.76 at most. The level gap in the second example dwarfs it. After a Fed move, the value of your decision comes mostly from where your rate sits against the field, not from whether it moved.

What should you do after a Fed move?

Wait about two weeks, check your actual rate, compare it with the field, and then run the break-even decision from Chapter 1. In our snapshot the median raiser moved in 7 days, but 10 of the 29 took 12 days or more.

1. Give it two weeks. Do not act on day one. A bank that had not changed after 3 days may still change by day 14, and waiting two weeks costs little. On the quarter-point example, $60.76 a year is about $2.34 per two weeks.
2. Read your own rate. Use your account statement or the app, not a marketing page. Check whether the rate shown is a promotional rate, a tiered rate that applies to only part of your balance, or one with conditions. Chapter 5 covers how to read those terms.
3. Compare with the field. Today the best savings APY we track is 4.27% APY and the national average we track is 0.38% APY. Both come from our rate tables and change over time. Compare your account with accounts that are insured, have no conditions you cannot meet, and accept your balance.
4. Price the gap. Put your balance, your rate and the alternative's rate into the calculator below, or into the bank switch ROI calculator.
5. Apply the decision rule. Switch when the net gain over the time you will keep the money is positive. If it is not, set a date to look again.

The default figures in the calculator match the second worked example, so the printed numbers and the calculator agree. Replace the rates with the ones you are quoted. The calculator lets the new rate decline after a hold period, which is the right thing to model when the better rate came from a promotion or a recent hike, and you should read Chapter 3 on how long a top rate lasts before you assume it holds.

If a Fed cut comes instead, this chapter's data does not tell you how your bank will respond. Our snapshot is a hike. It covers no cut, and we do not claim a bank that raised quickly will also cut quickly. What carries over is the method: wait, read your own rate, compare it with the field, and price the gap.

What does this chapter change about your plan?

It changes the trigger. Do not wait for the Fed to fix your rate, and do not assume your bank will follow it. Treat a Fed decision as a reason to check your rate against the field, then run the break-even decision with your own numbers.

In this snapshot the answer to "do savings rates follow the Fed?" is that some do, partly, on their own schedule: a quarter of the institutions we measured raised within 16 days, a median of 7 days after the move, and most did not. The cleaner rule is the one from Chapter 1. If the gap between your rate and a comparable insured account repays your cost within your horizon, move. If it does not, leave the money where it is and set a date to look again.

The national average myth explains why the field and the average are not the same comparison, and the September 2026 hike article covers the macro side. For the long-run question of deposit beta itself, the data will take several more Fed moves, and we will update this chapter as the snapshot grows.